101 Ky. 223 | Ky. Ct. App. | 1897
delivekeu the opinion oe the court.
On the 6th day of July, 1893, Henry Grinninger and others instituted their suit, in equity in the Lee Circuit Court against the Hope Milling, Mining and Lumber Co., a corporation created under the laws of Kentucky, alleging that the defendant company was indebted to them for work and labor performed, under contract, in the erection and construction of a saw mill and building in Lee county, and charging that this work was performed within twelve months before the •filing of the petition, .and that within sixty days after they ceased such labor they filed in the office of the Lee County Co-urt a statement of the amount due them, with a description of the property upon which the labor had been performed, and the name of the owner, and claiming a lien upon the building and all the machinery which went to make up
Upon the filing of this petition the clerk of the Lee Circuit Court referred the case to the master commissioner of the court, with directions to ascertain the names of all persons who had liens against the property, the character of such liens, the amount of the debts and the order of their priority; and under that order the commissioner, in January, 1894, filed his report to the effect that there were prior liens on the property in favor of laborers for $266.39; that David Davis, as assignee of D. K. Norton & Son, held a lien of equal dignity, and priority with those of the laborers, Grinninger, etc., for $719.29; that the Winchester Bank held an attachment lien on the property for $540.12, with interest and costs; that D. L. Cook, for the Clark County National Bank, held an attachment lien for $529.45, with interest and costs, and the Market National Bank an attachment lien for $321, with interest and cost, etc.
To this report the attaching creditors excepted, because it allowed the assignee of Norton & Son a priority on their debt of $719.29, and the assignee of Norton & Son excepted to- the report because it failed to. allow the whole of their debt as a preferred lien.
The chancellor .sustained the exception of the attaching creditors and held their liens to be prior and superior to the claim of Norton & Son’s assignee, and, the property having sold for only $1,425, a sum not sufficient to discharge all the lien claims, Norton & Son’s assignee brought his appeal to this court, asking a reversal. The record discloses these facts in connection with the claims of the parties to this
On the 23d day of June, 1893, the milling company, through its president, W. S, Holden, executed to Norton & Son a mortgage upon a tract of land described as situated in Lee county, Ky., and containing 1,500 acres, being the property conveyed to the mortgagors by Mrs. Reed, the mortgagors covenanting with the mortgagees that the title to the prop- • erty so conveyed was clear, free and unencumbered, to secure the payment of $1,700 of the indebtedness due by the milling company to Norton & Son. The evidence shows that this 'mortgage was executed in Covington, Ky., and was lodged for record in the office of the clerk of the Lee County Court on the 6th day of July, 1893. On the 7th day of July, 1893, Norton &• Son filed in the office of the clerk of the Lee County Court a statement of the amount due them by the milling company, with the credits thereon and a description of the property sold by them to the milling com
On the 29th day of June, 1893, the Winchester Bank and D. L. Cook, for the Clark County National Bank, instituted their suit in the Clark Circuit Court against the Hope •Milling, Mining and Lumber Co., had attachments sued out and levied by the sheriff of Lee county upon the same property upon which the lien of Norton & Son had been asserted, and on the 5th day of July, 1893, the Market National Bank instituted its suit in the Clark Circuit Court, sued out an attachment and had it levied upon the same property.
At the September term of the Clark Circuit Court these attaching creditors recovered judgments for the amount of their respective claims, the chancellor sustaining their attachments and adjudging them liens on the same saw mill
The question presented by this appeal is whether the appellant, the assignee of D. K. Norton & Son, or the attaching creditors have the prior lien upon the mill machinery and mill fixtures of the Hope Milling, Mining and Lumber Co. It is contended by the appellees that appellant’s waived their statutory lien by accepting the mortgage upon the real estate from the debtor. This is denied by appellant because the grantor had no title to the mortgaged property, and that they were induced to accept same by fraudulent representations; that it furnished no security for their debt; that the acceptance did not operate as a waiver, and that they had the right to abandon it and assert their statutory lien within the prescribed time.
To sustain their contention appellees rely on the concluding paragraph of section 2467, of the Kentucky 'Statutes, which reads as follows: “Nor shall the liens authorized by this chapter have effect if security shall have been taken for labor performed or materials furnished.”
The first question is, were Norton & Son estopped by the acceptance of this mortgage from asserting their statutory lien, or had they the right, upon the discovery of the fraud which had been practised upon' them, to assert their lien with the same effect as if such security had not been taken ? Upon this question Chitty on Contracts, page 748, says: “Fraud avoids any contract into which it enters alt initioin favor of the party injured by it, both in law and equity.” Pomeroy, in his work on Equity Jurisprudence, page 872, says: “The defrauded party is permitted to rescind a con
We think there can be no doubt that fraud so permeated the transaction by which Norton & Son were induced to accept the mortgage that they had the right to ignore it and to take such steps as were necessary to restore them to their original position respecting the property sold by them to the milling company, and, as the statutory period for filing their lien had not expired at the time they discovered this fraud, they had the right to file and assert their lien as if the mortgage had not been taken by them.
Who then has priority, Norton & Son under their statutory lien, or the attaching creditors under their judgments? In the case of the Caldwell Institute v. Young, 2 Duvall, 586, this court said: “We may add on this- subject of liens of m-erchanics that they commenced with the commencement of their work, continued to enlarge, pari passu with its progress, and were made fully effectual from their inception to their consummation, by registration within, six months, and no intervening encumbrances could break their continuity or curtail their extent. Any other construction of the beneficent statute enacted for -the encouragement and security of building mechanics, might frustrate its object and make it a-mockery. And we are of the opinion that properly registered liens of mechanics and material men are prior and superior to all other encumbrances.” Drake on Attachments, section 220, says: “It is a well settled principle
It is clear from these adjudications that the attaching creditors could have acquired only such rights in the property attached as were held by the Hope Milling, Mining and Lumber Co., and their attachment liens should have been held subordinate to the vendor's lien of Norton & Son for the machinery which was sold and delivered to the milling
We do not think that Norton & Son are entitled to any lien for the balance due upon their account of $1,096.08, for the machinery sold by them to the defendant company at the time that company was located at Iron City, Tenn., as this was a distinct and independent transaction from the sale of the machinery to the same company subsequently to its removal to Kentucky, and the time had passed in which they could have asserted a lien under the statute for this machinery. In short, we think the report of the master commissioner as to these liens should have been confirmed.
For the reasons indicated this cause is reversed and remanded for proceedings consistent with this opinion.